UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 27, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-8509
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NANTUCKET INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 58-0962699
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(State of other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
105 Madison Avenue, New York, New York 10016
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(Address of principal executive offices) (Zip Code)
(212)889-5656
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(Registrant's telephone number, including area code)
_________________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) as been subject to such
filing requirements for the past ninety days. X YES [ ] NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant had filed all documents and
reports required to be filed by Sections 12,13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] YES [ ] NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
<PAGE>
NANTUCKET INDUSTRIES, INC. AND SUBSIDIARIES
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QUARTERLY REPORT
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QUARTER ENDED MAY 27, 1995
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I N D E X
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Part I.
FINANCIAL INFORMATION PAGE
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Consolidated balance sheets 3
Consolidated statements of operations 4
Consolidated statements of cash flows 5
Notes to consolidated financial statements 6 - 8
Management's discussion and analysis of financial condition
and results of operations 9 - 10
Part II.
OTHER INFORMATION NONE
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Signature
<PAGE>
Nantucket Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE><CAPTION>
February 25, February 25,
1995 1995
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ASSETS (Notes 6)
<S> <C> <C>
CURRENT ASSETS
Cash $32,049 $595,918
Accounts receivable, less allowance for
doubtful accounts of $194,000 and $175,000,
respectively (Note 1-c) 6,472,148 4,928,272
Inventories (Notes 1-d and 4) 10,984,196 11,390,858
Refundable income taxes (Note 7) - 558,000
Other current assets 760,054 538,062
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Total current assets 18,248,447 18,011,110
PROPERTY, PLANT AND EQUIPMENT - NET (Notes 1-e and 5) 3,766,871 3,772,008
OTHER ASSETS,NET 168,194 412,324
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$22,183,512 $22,195,442
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt (Note 6) $975,000 $700,000
Accounts payable 2,405,989 3,693,908
Accrued salaries and employee benefits 811,882 907,906
Accrued unusual charge (Note 3) 465,000 765,000
Accrued expenses and other liabilities 358,267 1,203,633
Accrued royalties 399,546 468,355
Income taxes payable 2,640 10,184
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Total current liabilities 5,418,324 7,748,986
LONG-TERM DEBT (Note 6) 9,941,799 7,999,847
ACCRUED UNUSUAL CHARGE (Note 3) 1,058,330 1,450,000
NOTE PAYABLE TO RELATED PARTY (Note 6) 300,000 300,000
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16,718,453 17,498,833
COMMITMENTS AND CONTINGENCIES (NOTES 3,9 and 12)
STOCKHOLDERS' EQUITY (Notes 8 and 9)
Preferred stock, $.10 par value; 500,000 shares
authorized, of which 5,000 shares have been
designated as non-voting convertible and are
issued and outstanding 500 -
Common stock, $.10 par value; authorized
6,000,000 shares; issued 2,991,848 299,185 299,185
Additional paid-in capital 11,576,898 10,577,398
Accumulated deficit (6,340,135) (2,898,532)
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5,536,448 7,978,051
Less-13,052 shares at February 25, 1995 and
503,052 shares at February 26, 1994 of
common stock held in treasury, at cost 71,389 3,281,442
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5,465,059 4,696,609
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$22,183,512 $22,195,442
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</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
Nantucket Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen Weeks Ended
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May 27, May 28,
1995 1994
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Net sales $10,492,736 $8,508,708
Cost of sales 7,886,142 6,848,573
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Gross profit 2,606,594 1,660,135
Selling, general and administrative
expenses 2,019,026 1,881,214
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Operating profit (loss) 587,568 (221,079)
Interest expense 331,326 227,501
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Net income (loss) 256,242 (448,580)
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Net income (loss) per share $0.09 ($0.18)
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Weighted average common shares outstanding 2,981,296 2,488,796
============== ============
The accompanying notes are an integral part of these statements.
4
<PAGE>
Nantucket Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Thirteen Weeks Ended
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May 27 May 28
1995 1994
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Cash flows from operating activities
Net income (loss) $256,242 ($448,580)
Adjustments to reconcile net (loss) income
to net cash (used in) provided by
operating activities
Depreciation and amortization 91,898 89,731
Provision for doubtful accounts 30,000 11,921
Provision for obsolete and slow moving inventory 60,000 60,000
(Increase) decrease in assets
Accounts receivable (732,755) (1,941,817)
Refundable income taxes 46,664
Inventories 197,801 (33,285)
Other current assets (38,219) (255,331)
Increase (decrease) in liabilities
Accounts payable 185,515 (1,560,301)
Accrued expenses and other liabilities (311,592) (1,044,622)
Income taxes payable (7,544)
Accrued unusual charge (98,788) (355,709)
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Net cash (used in) provided by operating
activities (359,898) (5,438,873)
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Cash flows from investing activities
Additions to property, plant and equipment (44,799) (87,985)
Decrease (Increase) in other assets 31,850 (84,797)
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Net cash used in investing activities (12,949) (172,782)
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Cash flows from financing activities
Payments of previous line of credit agreement (5,090,294)
Issuance of convertible preferred stock 1,000,000
Borrowings under line of credit agreement, net 372,647 9,169,779
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Net cash provided by (used in) financing
activities 372,647 5,079,485
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NET DECREASE IN CASH ($200) ($532,170)
Cash at beginning of period 32,049 595,918
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Cash at end of period $31,849 $63,748
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SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash paid during the period:
Interest $302,911 $205,496
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Income taxes $10,880
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The accompanying notes are an integral part of these statements
5
<PAGE>
NANTUCKET INDUSTRIES, INC.
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AND SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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THIRTEEN WEEKS ENDED MAY 27, 1995 AND MAY 28, 1994
--------------------------------------------------
(unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of May 27, 1995 and the consolidated
statements of operations and statements of cash flows for the thirteen weeks
ended May 27, 1995 and May 28, 1994 have been prepared by the company without
audit. In the opinion of management, all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation of the financial position
of the Company and its subsidiaries at May 27, 1995 and the results of their
operations and cash flows for the thirteen weeks ended May 27, 1995 and May 28,
1994 have been made on a consistent basis.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these consolidated
financial statements be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's 1995 Annual Report on
Form 10-K.
The results of operations for the periods presented are not necessarily
indicative of the operating results for the full year.
2. INVENTORIES
Inventories are summarized as follows:
May 27, February 25,
1995 1995
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Raw materials $ 1,812,761 $ 1,960,413
Work in process 5,449,009 5,594,387
Finished goods 3,464,625 3,429,396
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$ 10,726,395 $ 10,984,196
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6
<PAGE>
NANTUCKET INDUSTRIES, INC.
--------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THIRTEEN WEEKS ENDED MAY 27, 1995 AND MAY 28, 1994
--------------------------------------------------
(continued)
(unaudited)
3. INCOME TAXES
At May 27, 1995 the Company had a net deferred tax asset in excess of
$4,600,000 which is fully reserved until it can be utilized to offset
deferred tax liabilities or realized against taxable income. In addition,
the Company had a net operating loss carryforward for book and tax purposes
of approximately $12,000,000 and $9,000,000 respectively. Accordingly, no
provision for income taxes has been reflected in the accompanying financial
statements.
4. STOCKHOLDERS' EQUITY
On March 22, 1994, the Company sold to its Management Group 5,000 shares
of non-voting convertible preferred stock for $1,000,000. These shares are
convertible into 200,000 shares of common stock at the rate of $5.00 per
share. These shares provide for cumulative dividends at a floating rate
equal to the prime rate and approximate $92,000 at May, 1995. Such
dividends are convertible into common stock at the rate of $5.00 per share.
These shares are redeemable, at the option of the Company, on or after
February 28, 1999 and have a liquidation preference of $200 per share.
On August 22, 1994, the Company sold 490,000 shares of its common
treasury stock to GUESS?, Inc. and certain of its affiliates at $6.00
per share. The treasury stock issued had an average cost of $6.52 per
share. Accordingly the difference between the net proceeds, approximating
$2,900,000 and the treasury share's cost of $3,196,000 was applied to the
Company's Retained Earnings.
In connection with the Company's refinancing on March 22, 1994, the
Company entered into a $2,000,000 Term Loan Agreement with Chemical Bank.
This loan is payable in scheduled installments of $500,000 on December 14,
1994, June 15, 1995, December 15, 1995 and March 15, 1996. This agreement
also provides for mandatory prepayments of $500,000 due September 15, 1994
and December 15, 1994, $250,000 due February 15, 1995 and June 15, 1995 and
$500,000 due September 15, 1995. In fiscal 1995, the Company prepaid
$1,000,000, which pursuant to the agreement were applied to the scheduled
installments of December 15, 1994 and June 15, 1995. Accordingly, the next
schedule installment will be due December 15, 1995. Pursuant to the
agreement, the Company issued 2,500 treasury common shares related to the
mandatory
7
<PAGE>
prepayment not made on February 15, 1995. The agreement requires
the Company to issue additional common shares at the rate of 1 share for
every $100 of mandatory prepayment if such prepayments are not made in
accordance with the schedule payment dates.
5. UNUSUAL CHARGE
In the fourth quarter of fiscal 1994, the Company terminated the
employment contracts of its Chairman and Vice Chairman. In accordance with
the underlying agreement, they will be paid an aggregate of approximately
$400,000 per year in severance, as well as certain other benefits, through
February 28, 1999. The present value of these payments, $1,915,000, was
accrued at February 26, 1994. Thru May 27, 1995 $490,000 of this accrual
has been paid; $391,000 during fiscal year 1995 and $99,000 during the
first quarter of fiscal 1996.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operation
--------------------
Net sales for the first quarter ended May 27, 1995 increased 23% from
prior year levels to $10,493,000. This is a result of a 38% increase in revenues
from the core men's fashion underwear division and a 35% increase in the
GUESS? intimate apparel revenues. These increases were offset by declines of
$882,000 from the elimination of unprofitable product lines.
For the first quarter, the gross profit increased $946,000 to $2,607,000.
Gross profit margins for the first quarter increased to 24.8% compared to the
prior year level of 19.5%. Higher profit margins are attributable to improved
product mix of increased GUESS? sales, operating efficiencies and lower cost
sourcing of major styles.
Selling, general and administrative expenses for the first quarter
increased 7.3% to $2,019,000 compared to $1,881,000 for the first quarter of the
prior year. The increase of $138,000 is primarily due to variable selling costs
related to the increase in net sales.
The increase in interest expense of $104,000 is due to the higher prime
rates in effect during the first quarter of this year compared to prior year and
also to the increase in debt relating to the Company's refinancing of March 22,
1994.
Liquidity and Capital Resources
-------------------------------
During fiscal 1994 the Company's liquidity and capital resources were
adversely affected by its operating losses and reduced borrowing availability
under the existing credit facilities. Additionally, the Company had difficulty
receiving delivery of raw materials for its domestic production and an absence
of availability to open letters of credit for its imported products.
The Company was successful in refinancing its credit agreements with (i)
a three year $15,000,000 revolving credit facility, including a $3,000,000
letter of credit facility, with Congress Financial, (ii) a $2,000,000 Term Loan
Agreement with Chemical Bank and (iii) an additional $1,500,000 Term Loan with
Congress replacing the Industrial Revenue Bond financing of the Cartersville,
Georgia manufacturing plant. Additionally, the $1,000,000 investment in the
Company by the Management Group and the sale of 490,000 shares of common
treasury stock to GUESS?, Inc. and certain of its affiliates increased the
Company's liquidity and capital resources. The net proceeds of $2.9 million from
the sales of treasury shares was used to prepay $500,000 of bank debt and the
balance provided additional working capital resources. The Company believes that
the credit facility provides adequate financing flexibility to fund its
operations.
9
<PAGE>
Working capital increased $109,000 from year-end levels to $12,939,000.
This increase reflects an increase of accounts receivables due to increased
sales levels, offset by a decline in inventory levels, and reductions of
accounts payable and accrued liabilities. These increases in working capital
were offset by an increase in current maturities of debt to Chemical Bank.
The Company believes that the moderate rate of inflation over the past
few years has not had a significant impact on sales or profitability.
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NANTUCKET INDUSTRIES, INC.
(Registrant)
By:
s/ Ronald S. Hoffman
---------------------
August 14, 1995 Ronald S. Hoffman,
Vice President - Finance
(Chief Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS INFORMATION EXTRACTED FROM THE STATEMENTS DATED
MAY 27, 1995 AS FILED ON FORM 10-Q FOR THE QUARTERLY PERIOD THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-25-1996
<PERIOD-END> MAY-27-1995
<CASH> 31,849
<SECURITIES> 0
<RECEIVABLES> 7,395,903
<ALLOWANCES> 221,000
<INVENTORY> 10,726,395
<CURRENT-ASSETS> 18,731,420
<PP&E> 7,389,854
<DEPRECIATION> 3,670,083
<TOTAL-ASSETS> 22,587,535
<CURRENT-LIABILITIES> 5,792,247
<BONDS> 0
<COMMON> 299,185
0
500
<OTHER-SE> 5,421,615
<TOTAL-LIABILITY-AND-EQUITY> 22,587,535
<SALES> 10,492,736
<TOTAL-REVENUES> 10,492,736
<CGS> 7,886,142
<TOTAL-COSTS> 7,886,142
<OTHER-EXPENSES> 1,989,026
<LOSS-PROVISION> 30,000
<INTEREST-EXPENSE> 331,326
<INCOME-PRETAX> 256,242
<INCOME-TAX> 0
<INCOME-CONTINUING> 256,242
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,242
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
